Elon Musk said on Sunday that SpaceX has closed $40 billion in debt financing to buy graphics processing units, the chips that run artificial intelligence systems, as CNBC’s Jenny Lee reported. In a post on X he gave the reason lenders said yes: SpaceX is investment grade, and it earns money from Starlink satellite internet and rocket launches. A second post added that the deal is mostly callable debt for GPUs due to arrive in the first and second quarters of 2027. “Not a major factor this quarter,” he wrote, according to Reuters.
Then he explained why other people can’t do the same thing. Over the past few weeks, Musk wrote, debt markets “have almost entirely shut off access to money for any company that doesn’t have substantial revenue independent of AI data centers.” The neoclouds, the companies that rent out computing infrastructure built for AI and machine-learning work, are the obvious casualties. “The 200+ neoclouds are going to see guppy-level death and consolidation,” he wrote. “Some will make it through, but not many.”
So here’s the lesson, roughly. If you want to borrow tens of billions of dollars to buy AI chips, the best credential you can have is being something other than an AI chip company.
That sounds like a joke but it’s just how lending works. A lender to a GPU buyer has one question: if AI demand slumps, what pays me back? For a pure neocloud the answer is mostly the chips, plus whatever customer contracts it signed. Those chips would be worth the least at exactly the moment the lender needs them, because every other neocloud would be trying to sell the same ones. For SpaceX the answer is Starlink subscribers and launch customers, who will keep paying whatever happens to AI. Musk didn’t just get a better rate than the neoclouds. He told the market which kind of collateral it now trusts.
The awkward detail is that the AI part of SpaceX, which the company calls “Super Intelligence,” or SI, is now its biggest business. Its latest earnings release put third-quarter SI revenue at $7.56 billion, up from $813 million a year earlier. That’s about 9.3 times as much, or roughly $30 billion a year if you multiply the quarter by four. The part of SpaceX that most resembles a neocloud is the largest part of it. Musk’s argument is that it isn’t the only part, and that the Starlink cash cow is what makes the rest creditworthy.
The box
Then there’s the structure. Before Musk’s posts, Bloomberg reported, citing people familiar with the matter, that SpaceX was talking to banks and investors about raising the $40 billion to buy Nvidia chips. The plan was to use a special purpose vehicle, keeping the debt off SpaceX’s balance sheet and protecting its investment-grade credit ratings. Goldman Sachs was leading the talks with investors, including Apollo Global Management. Earlier in October, the Financial Times had described about $10 billion of bank loans and $30 billion of investment-grade debt, with Pimco among the lenders in talks.
For the general shape of these deals, imagine a separate company that exists only to own a pile of GPUs. It borrows against them and leases them to SpaceX. Lenders get paid from SpaceX’s lease payments, which is why they care that SpaceX makes money from rockets. Rating agencies look at SpaceX and, if the structure works, see a lease commitment rather than $40 billion of new debt. There’s a pleasing circularity to it. SpaceX’s investment-grade rating is what persuades lenders, and the box exists so that borrowing the money doesn’t cost SpaceX that rating. Musk’s posts didn’t say whether the deal that closed uses the vehicle.
It also wasn’t a smooth ride. Bloomberg reported that the deal had run into obstacles amid credit market turmoil and rising borrowing costs. Reuters noted that Musk didn’t give an interest rate, name the lenders or describe the structure. It also said it wasn’t immediately clear what he meant by “closed,” or whether investors had agreed on pricing. Meanwhile the market’s view of SpaceX’s chip borrowing was already showing up elsewhere: earlier this month the cost of insuring against a SpaceX default hit a record.
That’s where “callable” comes in. Callable debt lets the borrower pay it back early. Lenders charge for that option, and it’s worth paying for when you borrow in a bad market. If credit markets calm down, or if rates fall, SpaceX can refinance more cheaply. If you’re locking in $40 billion just as lenders get nervous, you want to be able to leave once they relax.
The scale is roughly one quarter of SpaceX’s spending. The company expects fourth-quarter capital expenditure of $35 billion to $40 billion, and earlier reporting said the chip money would help fund the next phase of its Colossus GPU buildout in Memphis. CNBC’s take was that the deal shows how much capital the AI boom needs. Musk’s take was that only some companies will get it.
Anyway. It must be nice to finish borrowing $40 billion from the debt markets and then tell everyone that the debt markets are closed.